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I2 Technologies Inc. has set up a software development operation in Beijing, according to an executive of the Dallas-based vendor of supply chain management software.

The operation will primarily focus on the Chinese market, said Pallab Chatterjee, i2 president for solutions operations. “We will support from this centre customers in Greater China where the local language and script requires different kinds of software outputs,” he said.

The centre will also work on applications for customers in China around i2’s composite application development framework, he said. The composite application development framework and tool box enables users to develop applications on top of existing multivendor applications, using a master data model.

“The reason why we are doing this development work in China is that all of these composite applications require UI (user interface) work in the local language,” Chatterjee said.

I2 started the Beijing operation with about 10 people. “We are looking for staff with master’s (degrees) in computer sciences, and we are able to get them, but not as many as we can get in India,” Chatterjee said. I2 plans to employ about 100 staff at the development centre in China. Over 80 percent of i2’s revenue in China currently comes from the local operations of multinational companies, according to Chatterjee. The small and medium-size business segment in China has proven to be tougher to crack.

Small and medium businesses (in China) just don’t feel that they need to spend on IT,” he said. “A few of them will buy local brand ERP (enterprise resource planning) software for something like US$25,000. Most other local companies work out of a (Microsoft) Excel spreadsheet.”

Although i2 considered aggressively low pricing for that business segment, the market is not “culturally ready” for it, Chatterjee said. “We have really not seen that much demand for any kind of supply chain management software from the smaller tier companies,” Chatterjee said.

However, when these companies get bigger, or consider entering the export market, and competing on a global scale, they start looking for software of the type sold by i2, Chatterjee said. “There are a few Chinese companies that have revenues of aboutUS$1.5 billion to US$2 billion that are our customers,” he said. Chatterjee added that companies linked to multinationals as suppliers may show some interest in supply chain management software.

Even as i2 expands Chinese development operations, India will continue to be the company’s main development location in Asia, he said.

I2 employs about 1,100 of its worldwide staff of about 2,400 at its operations in Bangalore and Mumbai in India. The company moved a significant part of its product development, consulting, customer support, sales and marketing to its Indian operations.

“In product development we would like to keep 60 per cent in India and 40 per cent in the U.S.,” Chatterjee said. “In consulting we would like to take it up to 70 per cent from India and 30 per cent out of the U.S. It is 50 per cent from the U.S., and 50 per cent from India right now.”

With new deals in the pipeline, and as it rolls out its new composite application development framework technology, i2 expects to hire both in India and the U.S., Chatterjee added.